Euro Area – The Debt Crisis Intensifies

On Friday Spain’s government announced a €15 billion ‘internal bailout’ package to support its regions, several of which teeter on the brink of insolvency. To widespread incredulity, the government insisted that this would not increase the government’s debt. Our initial conclusion from this was that Spain’s government has, or at least believes to have, very good relations with Santa Claus, who will presumably provide the funds. Failing such an intervention by the mythical gift-bearer from the North pole, we would expect that the public debt will in fact increase.